Based on the provided financial report articles, I generated the title for the article: "Quarterly Report (Q2) for the period ended June 30, 2024, of Company 0001042187" Please note that the title may not be exact, as the provided text does not contain a clear title. However, based on the content, I inferred the title to be a quarterly report for the second quarter of 2024.
The report presents the financial statements of the company for the quarter ended June 30, 2024, and the year ended December 31, 2023. The company reported net income of $X million for the quarter, compared to $Y million for the same period last year. Revenue increased by Z% to $W million, driven by growth in the company’s core business. The company’s cash and cash equivalents stood at $X million as of June 30, 2024, and its total assets were $Y million. The company’s total liabilities were $Z million, and its total equity was $W million. The company’s diluted earnings per share (EPS) was $X per share for the quarter, compared to $Y per share for the same period last year.
Forward Looking Statements
This Quarterly Report on Form 10-Q includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The company has based these forward-looking statements on its current expectations and projections about future results. While the company believes its opinions and expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. The company’s actual results may differ substantially from the views and expectations set forth in this report. The company disclaims any intent or obligation to update any forward-looking statements after the date of this report to conform such statements to actual results or to changes in its opinions or expectations.
Overview
The company produces film products for novelty, packaging and container applications, including foil balloons, latex balloons, films for packaging and custom products, and flexible containers. The company operates a manufacturing facility in Lake Barrington, Illinois and previously owned a majority stake in a facility in Guadalajara, Mexico, which was sold in 2021. In 2023, the company changed its name to include “Green” to communicate its intention to supply biodegradable and compostable materials developed by its partners in Asia.
September 30, 2021 Financing, Amended and Extended to September 30, 2025
In September 2021, the company entered into a loan and security agreement with Line Financial that provided a $6 million revolving credit facility and a $731,250 term loan facility, secured by substantially all of the company’s assets. This agreement was extended in September 2023 with a new maturity date of September 30, 2025. Key changes included:
- Replacing the asset monitoring fee on the revolving credit facility with an increase in the interest rate to Prime plus 7.82% per annum
- Reducing the interest rate on the term loan to Prime plus 1.45% per annum and providing a one-time additional advance of $206,000 to reset the term loan balance to $731,000
- Reducing the renewal fee to $50,000
The company must maintain a minimum tangible net worth of $4 million and is subject to certain affirmative and negative covenants. As of June 30, 2024, the term loan balance was $0.6 million and the revolving line of credit balance was $4.8 million.
Note Payable, Related Party
The company has a $1.3 million note payable to a director and former chairman, John H. Schwan, with a 6% interest rate. The company repaid $1 million of this note in January 2024, with the remaining $0.3 million to be paid at a future date.
Results of Operations
Net sales for the three months ended June 30, 2024 were $4.4 million, up 7% from $4.1 million in the prior year period. For the six months ended June 30, 2024, net sales were $9.2 million, up 2% from $9.1 million in the prior year period.
By product category:
- Foil balloon revenues increased 11% in the three-month period but decreased 4% in the six-month period, as smaller customers managed inventory more aggressively.
- Film product revenues decreased 71% in the three-month period and 30% in the six-month period, due to inconsistent order flow and industry consolidation.
- Other revenues, including balloon-inspired gifts, latex balloons, and accessories, increased 75% in the three-month period and 29% in the six-month period.
Sales to the company’s top 3 and top 10 customers represented 87% and 93% of total sales in the three-month period, respectively, and 84% and 93% in the six-month period. Two customers accounted for over 10% of consolidated net sales in both periods.
Cost of sales as a percentage of sales was 84% and 83% in the three and six-month periods ended June 30, 2024, compared to 87% and 82% in the prior year periods.
General and administrative expenses were higher in 2024 due to increased audit fees, including “re-audit” costs related to the former auditor being suspended. Selling, advertising and marketing expenses also increased in 2024 compared to 2023.
Interest expense increased in 2024 due to higher market interest rates. The company also recognized income in 2023 related to Employee Retention Tax Credits.
Financial Condition, Liquidity and Capital Resources
During the six months ended June 30, 2024, the company generated $108,000 in cash from operations, compared to using $1.4 million in the prior year period. This was driven by decreases in accounts receivable and inventory, partially offset by a decrease in trade payables.
Investing activities used $274,000 in cash in the 2024 period, compared to $94,000 in the 2023 period. Financing activities used $733,000 in cash in 2024, including $200,000 in changes to revolving debt and a $1 million repayment of the related party note payable, partially offset by $500,000 in proceeds from issuance of convertible preferred stock.
At June 30, 2024, the company had $22,000 in cash. The company’s ability to continue as a going concern is dependent on executing its business plan and obtaining adequate capital, as there is substantial doubt about its ability to do so. The company’s primary sources of liquidity are cash, cash equivalents and availability under its credit agreement, which expires in September 2025.
The company’s business has historically been seasonal, with approximately 40% of foil balloon sales occurring from December through March.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
In April 2024, the company changed its independent auditor from BF Borgers, CPA PC to Wolf & Company, P.C. This was due to BFB being suspended from appearing or practicing before the SEC. As a result, the company was unable to issue certain filings in 2024 until the new auditor could complete procedures related to 2023 balances. The Nasdaq provided the company until September 27, 2024 to file its delinquent filings, including this Form 10-Q.
